The future looks bright for California’s biomedical industry. A recently released report from the California Healthcare Institute (CHI) and PricewaterhouseCoopers named biomedicine as one of the most recession-proof sectors in the state’s economy, but pointed to some upcoming challenges that the industry might face.
First, the good: The report found that California has a strong hold on the biomedical field, employing one in six of the 1.6 million biomedical workers in the United States. Conclusions from the report confirmed nearly two-thirds of California biomedical companies have either maintained or expanded their workforce, and more than half of them anticipate further expansion of their R&D staff during the next two years.
The report, released in February, is based on a survey of 200 of California’s top biomedical employers.
California has remained at the forefront of the life sciences in innovation because of its unique ecosystem of biomedical assets, “and has a vested interest in continuing to do so,” says Tracy Lefteroff, national life sciences partner for PricewaterhouseCoopers.
Also promising is California’s volume of venture capital funding within the biomedical industry — the highest in the nation, accounting for 42 percent of funds for national biotech and medical device companies. This has led directly to nearly 870 biopharmaceutical products in various stages of development in the state, many focused on cancer treatments.
But the survey suggests that challenging times could lie ahead for the biomedical industry because of the tough economic climate. These challenges include corporate taxation, which nearly two-thirds surveyed said would be extremely important; tax incentives for innovation; and workforce preparedness.
“While the biomedical industry has weathered the recession, it faces unprecedented challenges — access to capital, the educational funding crisis and uncertainty surrounding health care reform,” says David Gollaher, president and CEO of CHI. Now more than ever, the sustainability of California’s biomedical industry depends on decisions made in Sacramento and Washington.”
The survey also revealed that respondents expect the greatest threats to the industry’s growth to come within the next five years. In the survey, more than 80 percent expressed wariness about government intervention/price controls and the risk-aversion of the Food and Drug Administration, and more than half cited intellectual property protections and declining access to capital as concerns.
Pessimism led survey respondents to foresee at best a holding pattern in the biomedical field, with more than half of the executives surveyed expecting an increase in bankruptcies. Yet 48 percent predict increased revenue, while 44 percent expect revenues to remain steady.
Despite the concerns, the data largely offers hope. All four of California’s leading biomedical clusters (in the San Francisco Bay Area, Los Angeles, Orange County and San Diego) grew between March 2008 and 2009 by at least 1 percent.
“California is the birthplace of biotechnology, and our state’s biomedical innovation delivers not only global advances in health care but also the jobs that drive our economy,” Gollaher says.